MCQ

1.What triggers CGT?

A)The happening of a CGT Event in relation to a CGT Asset

B)The happening of a CGT Event

C)The disposal of a CGT Asset

D)A contract to transfer a CGT Asset

2.In relation to the operation of CGT, which of the following statements is least correct?

A)A net capital gain is included in assessable income

B)A capital gain arises when the market value of an asset is greater than the cost of the asset

C)Assets purchased after 19 September 1985 generally require a consideration of CGT on their disposal

D)Net capital losses in any year are quarantined and carried forward to future years

3.The 'Corporate Taxation' model

A)Imposes tax on the income of the business entity at entity level

B)Permits the Tax Commissioner to tax both the company and the shareholder for income distributed to the shareholder

C)Is designed to ensure that shareholders to whom the company pays dividends pay all the tax owing for the dividend income

D)Is designed to ensure that companies and shareholders always share in equal proportion the tax owing for company income

4.Companies cannot claim deductions for the payment of dividends

A)True if the company pays the dividend in two instalments not less than six months apart

B)False

C)False unless the dividend is franked

D)True

5.The transfer of a trust's corpus from settlor to trustee is a CGT Event

A)False

B)True as long as the trustee signs a waiver guaranteeing that the settlor is not liable for any debts incurred by the trust

C)True

D)Only if the corpus is valued at greater than $5,000

6.Trustees may distribute tax losses to beneficiaries

A)Yes, because beneficiaries are equitably entitled to receive the tax benefit of trust losses

B)False

C)True

D)Only if the trust deed permits trustees to distribute tax losses to beneficiaries

7.A beneficiary who has a 'present entitlement' to a share of trust income

A)Has an immediate right to demand payment of distributable income

B)Has a right to payment subject to the trustee's discretion to retain the income in the trust for the next financial year

C)Has a right to request the trustee to distribute income at the trustee's discretion

D)Has an immediate right to payment unless he or she has previously spent time in prison

8.If a beneficiary is presently entitled to a distribution of trust income but is under a legal disability, then:

A)the beneficiary must pay tax on the income distributed

B)the income is tax-exempt

C)the beneficiary is entitled to a 'legal disability tax deduction'

D)the trustee must pay the tax on the income distributed

9.Which of the following transactions will give rise to an assessable capital gain?

A)Gerry purchased a car for $13,000 on 3 August 2015 and sold it for $18,000 on 25 November 2019

B)Michael purchased a ticket in a lottery for a new home worth $500,000. He won the home and received it on 12 September 2019. He is currently using it as his home

C)George injured his arm in a work accident and was given $10,000 in compensation for the personal injury

D)Philip purchased 1,000 shares in SOLAR for $9.00 each on 12 March 2015. He sold them for $11 each on 23 May 2019

10.Daniel purchased a rental property on 3 July 2018 and immediately rented it out earning $520 per week in rental income. He paid the following amounts in relation to the property

Purchase price$400,000

Stamp duty on purchase$3,500

Legal fees to transfer title to him$1,300

Interest paid on loan to purchase the property$28,000

Extension to main bedroom$14,000

Rates paid to the local council$1,500

What will be Daniel's cost base of the rental property for CGT purposes based on the above expenditure?

A)$448,300

B)$420,300

C)$418,800

D)$417,500

11.Gifts are:

A)Never tax-deductible

B)Always tax-deductible

C)Deductible if they fall within categories specified in the ITAA

D)Deductible if one person carries out work for another person and waives payment on the grounds that the work was 'a present'.

12.A taxpayer can deduct from his/her assessable income any loss or outgoing to the extent that:

A)It is incurred in gaining or producing the person's assessable income

B)The person has signed a declaration saying that all losses and outgoings incurred are 'for the benefit of the employer'

C)The loss or outgoing was incurred on the weekend

D)None of the above